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Debate over Government review of income tax and NI merger

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The Chancellor, George Osborne’s promise of a consultation on a possible merger of income tax and national insurance has prompted a question as to the extent of the review.

In announcing the consultation in the Budget, Mr Osborne said that any merger will not mean extending NI to cover pensioners or scrapping the tax’s contributory principle.

The recommendation for a merger was made in a recent report by the Office of Tax Simplification (OTS).

John Whiting, who is tax director at the OTS, said that even a partial merger would bring advantages, but he also expressed dismay that the Chancellor’s remit for the consultation fell short of a complete examination of a full alignment.

Mr Whiting said: “We’ve been careful to set out various stages to emphasise that a real difference can be made without going the whole hog.

“The one disappointment I have is that he has stopped short of looking into the contributory principle. It is not clear to what extent the contributory principle is necessary if we are moving a flat rate state pension. If we are having a study, shouldn’t we have a study of all aspects?”